EurasiaNet Eurasia Insight - Russian Pipeline Play Poses Dilemma for Turkey

EURASIA INSIGHT

RUSSIAN PIPELINE PLAY POSES DILEMMA FOR TURKEY
Mevlut Katik 9/27/06

Russian plans for a new natural gas pipeline are placing Turkey in a tough position. The new Russian route would use Turkey as a transit point for exports to the European Union, in effect creating a direct competitor to Turkish-controlled ventures. Given Ankara’s interests in joining the EU, however, Turkish officials are reluctant to be seen as creating hurdles for the project.

Word that Russia would proceed with plans to build the gas pipeline, dubbed Blue Stream 2, surfaced September 14 following a meeting between the chief of the Gazprom conglomerate, Alexei Miller, and Russian President Vladimir Putin. Blue Stream 2 is envisioned as having a capacity of 8 billion cubic meters (bcm) of gas per year, the bulk of which, about 5 bcm, would go to Italy. The Italian energy company ENI and Gazprom are expect to sign a strategic cooperation agreement in October, according to a September 21 report in the Russian business daily Kommersant. The Hungarian oil company MOL may also participate in the project.

Although Blue Stream 2 could assist Turkey in becoming what Turkish Energy Minister Hilmi Guler described as "Europe’s energy bridge," the Russian venture poses a difficult dilemma for Ankara. Turkish policy-makers are not keen to see Gazprom expand its share of the EU gas market, but they can’t at the same time be seen as obstructionist. Such a perception could increase opposition within the EU to Turkish membership. [For background see the Eurasia Insight archive].

Turkey clearly favors two other gas export ventures in which it is a direct participant, not merely a transit country. The first, the Nabucco Pipeline, would link Turkey and Austria, via Bulgaria, Romania and Hungary, and expand EU access to Persian Gulf and Caspian Basin supplies. Construction on the Nabucco line is slated to begin in 2008 and be completed in 2011. An associated link � the Baku-Tbilisi-Erzurum pipeline � will connect Turkey to Azerbaijan’s Shah Deniz gas field.

Ankara has not yet expressed an official opinion on Blue Stream 2. But in an interview with EurasiaNet, a Turkish official, speaking on condition of anonymity, pointed out that the Blue Stream 2 project appears to clash with the European Union’s stated goal of diversifying its sources of energy. EU officials expressed a desire to reduce their dependency on Russian exports after a pricing dispute between Russia and Ukraine led to disruptions in EU supplies in early 2006. [For background see the Eurasia Insight archive].

"Turkey supports and tries to contribute to the European Union’s efforts to diversify its [EU’s] routes and sources of energy," the Turkish official said. "For such a diversification, there exists the Shah Deniz pipeline, not only the Blue Stream project."

In addition, Turkey and Iran have been conducting talks in recent weeks on the provision of Iranian energy exports to the EU. [For background see the Eurasia Insight archive]. Blue Stream 2 could seriously dent Tehran’s export ambitions. It could also hurt Azerbaijan’s bottom line. Azerbaijani officials have announced that the Baku-Erzurum pipeline will be fully operational by the end of 2006. "Production [at Shah Deniz] will start at the end of the month [September] and will grow in the course of the year," David Woodward, president of BP Azerbaijan, said in mid-September.

Russia, like the other players in the rapidly intensifying EU energy-supply game, feels a sense of urgency. Blue Stream 2 would be ready no sooner than 2012, according to Russian media reports. The new route would parallel an existing pipeline under the Black Sea, Blue Stream 1, to Turkey, and then connect with the EU via Greece. The projected construction cost is about $5 billion. Blue Stream 1, which is designed to serve the Turkish market, has been plagued by underutilization and bickering over prices. [For background see the Eurasia Insight archive].

There is a chance that Blue Stream 2 could become operational sooner than the Nabucco route, which has already experienced technical delays. "Gazprom officials said the monopoly is in hurry to implement the [Blue Stream-2] project, because its rival, Nabucco, is expected to produce [transport] 31 billion cubic meters of gas per year," a September 21 commentary in Kommersant stated.

Beyond not wanting to add another complication to already tangled EU accession talks, Turkey may be hesitant to directly confront Russia over Blue Stream 2 because of Moscow’s ability to retaliate. Commentor Mirza Cetinkaya, writing for the Zamon Online webstite September 26, noted that Russia and Greece have strengthened strategic cooperation in recent months. In addition, Russia has expressed interest in constructing an oil pipeline to Greece via Bulgaria, bypassing Turkey. A move by Ankara to block Blue Stream 2, then, could serve to solidify a Russian-Greek partnership and undermine Turkey’s "energy-bridge" aspirations. "When big money from Russia, investments and tourism in Greek Cyprus are included, Greece appears to be an alternative [for Russian cooperation] to Turkey," Cetinkaya said. This factor "should be taken into consideration."

Editor�s Note: Mevlut Katik is a London-based journalist and analyst. He is a former BBC correspondent and also worked for The Economist group.

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